How to Deal with Cyber Police Freezing Your Bank Account from P2P Trading (India)

This is for anyone who’s innocent and has had their bank account frozen because of a freeze order from the Cyber Police. Just a heads up, if you don’t want to read through a lot of text, you can get the main points quickly here: https://i.imgur.com/5J3DI8p.png P2P trading is super popular in India, and loads of people use it for their everyday trades on platforms like Localbitcoins, WazirX, Binance, Paxful, and Kucoin, which all have plenty of liquidity. But the downside is that many folks don’t realize the risks of P2P trading, particularly that there’s a huge chance of unknowingly getting connected to a fraudster's account. Since the pandemic hit, cyber fraud has shot up a lot. Criminals have gotten really good at finding ways to launder their money, and P2P crypto trading lets them cash out pretty much instantly without leaving a trace. So, how does P2P fraud happen, and how does it impact me? A scam usually starts when the fraudster tricks the victim into sending money through a lottery scam, romance scam, or something similar. Then, the scammer uses that money to buy crypto from an unsuspecting seller (that’s you) via P2P. There are other cases too where the scammer might initiate a P2P trade with you, then tells the victim to send money directly to you. Once the victim catches on to the scam, they report it to the local police. The police jump in quickly, trying to track the funds and freeze them. If they find the cash in a bank account, they’ll send a freeze notice to your bank’s Nodal Officer under Section-102 CrPC to stop any withdrawals.

The rise of fintech companies has opened the gateway for fraudsters. In a race to open customer account PayTM and other companies are doing online KYC which fraudsters are using to open bank accounts with fake documents. In case you can't resolve using the above-mentioned methods you might need to contact the local courts to obtain a defreeze notice. FIR copy's are nowadays available on online search portals. You can use them to get more information. Make sure to keep all the relevant proofs and do not do any direct trades.

This is quite a useful post and helps people understand the risk in P2P trading. I was always under the impression that P2P trading with these big exchanges are safe. However, I always avoided this route. Now, I'm happy that I never did that. But yes, explaining people the risk about P2P trading is essential.

in my country it self fintech or p2p lending getting crazy so many of them pop up and make easy to take the loan from singe ID card and yes the ID card from custumer kyc can be sell by the company to other provide who need the data thats why for now i kinda scared to do some kyc if leaks happen we are done

Good article, but proving your involvement in criminal activity just to transfer money from someone's account to your account is not a legal argument. The problem of you buying and selling to the same person is considered money laundering and may lead to many legal problems, so it is better to buy and sell using cash, gift cards, or anything that does not include bank transfers. Freezing your account, and if it does not mean losing money, it may waste a lot of time and money on legal procedures. Peer-to-peer trading is beneficial in reducing fees but it must be approached with awareness and more seriousness.

Nice and resourceful article! Many people in India have already got their bank account frozen after p2p trading. Because there is no way to know from where the bitcoin buyer is arranging the money for you. So it is always best to avoid unknown traders emerged from nowhere. I always prefer localbitcoins platform because I can see the rating of a trader from there. Also I can see that how frequently that person trades. An usually active trader will have nice ratings. The best part of localbitcoins is that, you can't post rating for any random people, rather only to the people you have closed a trade contract. So just keep your eye and ears open and you should be fine.

Any transaction done online leaves a trail. If the coins were sourced illegally then it can still create problems in direct trades as bitcoin is not exactly anonymous. In direct trades, you are usually blindsided to the personal identity of the buyer and the source of funds. It's next to impossible to prove that the coins arrived in your wallet during a direct trade done with cash. It's still better to stick with online platforms as you have enough proof. People residing in India can take note of the following terms: Cognizable Offence: It allows a police officer to arrest without a warrant. Please do not worry if you have done nothing wrong. If you fear harassment you can apply for anticipatory or pre-arrest bail. Non-Bailable Offence: It means that the right to grant bail lies with the court and you need to get the court's permission for availing bail. Compoundable Offence: It means with the permission of the court/authorities you can settle with the complainant and get your issue resolved. In the case of non-compoundable offences if the chances of conviction are less then the courts may allow settlement and quash the FIR.

Staying safe and staying not implicated in Cryptocurrency trading is difficult but it is at least ensured on binance centralised exchange as every peer to peer users are expected to pass their Know Your Customer (KYC) before being allowed to trade. In case of issue of transactions involving a suspected account, I believe one's lawyer can request the investigating officer to contact the exchange to examine that one is not an accomplice in a fraud case but just a p2p cryptocurrency trader.

Extremely useful and correct at the same time. But a major question that I have is that have you or any of your acquaintance have encountered any such incident? Or are you just giving a normal SOP that the banks and vigilance follow whenever such a thing happens? Because honestly speaking I have never heard of anyone stuck so bad that his account froze due to these doubts.   Also if anyone gets stuck in this situation I think it really won't be easy to get out of it especially if you have done it through telegram or even the forum.

I began to agree with you. A lot of peer-to-peer transactions have become a source of suspicion and can be considered dangerous. The problem is that although cryptocurrencies can be tracked, many countries do not have enough resources to track these transactions, and because they are multiple countries, it will become impossible to track them. So it is a suitable place for all scammers.

Not only in India, the problem exists in most of the countries and traders are losing their money after months and years later s they don't even know where to start and which trade went wrong. I made some strong points about avoiding such scammers a long way back but the same points can be helpful even now.

How can you exactly stay safe when you are crypto trading if it's your government that is against it and freezes your account, that's just impossible to do. Also, why do they want a KYC when the crypto profits from trading goes into the bank account of the user, it's not like their using an alias to that bank account.

Scammers are using fake kyc documents to register bank accounts. Nowadays account opening can be done online. Due to rampant negligence in new banks where no physical verification is done scammers are able to take advantage. The problem is if you don't have proof and you get some illegal funds in your account unknowingly not only will you be charged under various sections of IPC but they can also charge you under PMLA (Prevention of Money Laundering Act) provided you have used the illegal funds to purchase assets or convert it into some other form. P2P Trading with the wrong person can land you in a hell of a lot of trouble.

There is definitely a real risk that you may be getting funds from frausters when you sell bitcoins on a p2p platform. Especially in India, where regulations seem to be extremely tight, you need to be very careful not to deal with anyone who is even remotely sketchy. I would say that you should deal in cash deposits and ask for receipts whenever possible and wherever you are, because that is the closest thing you will get to irreversability and untraceability. That is certainly the norm here in AU.

Did you get the freeze order copy from the bank?

It would be better if you add what are the contents edited in OP so that it will be helpful for someone like me who is having short term memory loss. And again, you may get access to your account back but its not going to be easy and you have to wait for years to access the funds back so being cautious can save lot of your time.

Criminal cases are processed much faster in India. If you have done nothing wrong then there is no question of freezing. Banks nowadays are freezing accounts even without authorization. Its important to make them accountable for an illegal freeze.

Sorry banks can freeze account that is flagged and being flagged can happen either through, 1. The government directly: The officers of government or through the government agency can write to a bank on a particular bank account under investigation to suspend transactions on it for a period of time pending investigation on it, this could lead to freezing, suspension or the account being free for transaction. 2. Through the court: The court can also issue an order to a bank to free a particular account either the owner is avoiding arrest to frustrate the person financial source, illegal business owners etc. 3.The bank itself can flag an account on its own: If a bank identify a fraudulent action on an account, it can flag or freeze the account pending findings and resolutions. The bank is a government agency and can freeze an account because it is working on the directives of the government.

Thank you for this article, which is full of important legal information that you should know in case anyone is exposed to such incidents. But I would like to point out the exact point you mentioned:  "Do not trade in P2P with unknown people" This is absolutely true because it carries a high risk, not only can you buy money from fraudulent people who use you to launder their money, but also there are other risks that can occur due to a p2p exchange, for example, two days ago my friend told me that his uncle used the Binance platform to conduct a p2p trading where he wanted to sell 7000$ From bitcoin at a price greater than the market, but unfortunately for him he transferred his balance of bitcoin to the other person and pressed the “release” button before he got the money, and so the other person took the bitcoin and did not transfer the money and this man lost his money as a result of his stupidity and because of this type of service, the fraudster did not return his calls and Binance did not compensate for his loss. This incident also indicates the danger of this type of trading and that spot trading on platforms is much better and safer.

Banks have no power to freeze an account without prior authorization from a Government Authority. If they suspect anything fraudulent then they can report it to the FIU or ask the customer for justification and for fresh KYC. An arbitrary freeze by the bank will be considered illegal and a direct violation of the person's right to life under article 21 of the constitution. There are no rules framed by the RBI that allow a bank to put an indefinite freeze on your account.